Citigold : 29 April 2016 Quarterly Report March

About this update from Citigold Corporation Limited

ANNOUNCEMENT Quarterly Report For the period ending 31 March 2016 HIGHLIGHTS Detailed planning continued for the development of the Charters Towers project, centred on the Central Mine, to become a major high grade ultra- low cost producer of gold. Major project funding discussions continued with potential interested strategic partners to expand the Group's Charters Towers Gold Project into a major gold producer. Environmental monitoring and sampling were undertaken to increase the base data to assist planned growth in harmony with the local community through maintaining a relatively small environmental footprint and harnessing renewable and recycling techniques. Memorandum of Understanding ('MOU') was signed to partner in potentially acquiring an interest in the Kolar gold field in India. P art of a long term strategy to eventually have an interest in another giant world class gold project in addition to the Company's No. 1 priority Charters Towers Gold Project. OPERATIONS The underground mining operations at the Company's Charters Towers 'Central' and 'Imperial' mining areas remained on active care and maintenance during the Quarter as did the gold processing plant. No production mining operations were undertaken during the quarter. Ongoing planning for resumption of mining at Charters Towers is continuing, and in particular for the main Central Mine underground (shown left) that is planned to be reopened and expand into a 220,000 ounce annual producer of gold, subject to adequate capital funding. This outline of the mining plan for the Central Mine was given in the previous Quarterly Report (the period ended 31 December 2015). This outline of the mining plan included the Central Tunnel roadway (decline) which will be extended from a current point vertical depth of 201 metres from surface to initially junction again with the Brilliant Block Shaft at a vertical depth of 238 metres for fresh air intake and then continue some 700 metres roadway length to the King Shaft junctioning at a vertical depth of 585 metres. This Central Tunnel extension will open up the gold reefs (lodes) C03W, C38 and C39 respectively and then move on to C05E. Access to the C03W, C38 and C39 will come off the Central Tunnel extension, and gold reef access tunnels (drives) will be driven at 20 metre vertical levels to provide closely-spaced grade control samples. High volume gold ore extraction (stoping) will commence once these levels are developed and the King Shaft ventilation and emergency second exit (egress) are established. Consideration in the coming Quarter may be given to the re-starting of operations at the Imperial mining area to provide cash flow while negotiating the major funding required for the development of the large Central Mine. The Imperial operation was initially suspended to focus the use of plant and equipment at the main Central mine area. Re-starting operations is a relatively simple technical matter. There are regulatory requirements on ventilation, ground support and general operational health and safety to be satisfied ahead of recommencement. If such a decision is made the Company will make an announcement accordingly. Environmental monitoring and sampling were undertaken to increase the base data to minimise the Project's already relatively small environmental footprint, in future expansions. GEOLOGY AND EXPLORATION The last Quarter saw the geology team nearing completion of its re-classification and re-organisation of all geological data including surface and drill hole samples in preparation for the upcoming period of intensive exploration and expansion of both its inferred and indicated resources. Citigold geologists have also re- examined existing drill hole data and generated up-to-date 3D interpretations of the host structures at the Imperial mine site in order to gain a better understanding of subtle, previously unrecognised, variations in structure and host rock type that led to localisation of gold mineralisation. The updated structural models, based on more precise drill hole collar locations and a review of how the drill core is interpreted in 3D, will also aid in planning future mining. The new techniques developed are for mapping the precise geometry of the host structure which will lead to more accurate and precise information about the gold lodes being passed onto the underground mining and operations team. Citigold geologists have also been using the time to prioritise its numerous untested targets on the Mineral Development Licenses using up-to-date geological data and model of the mineralisation. Citigold continues to engage Adrok in utilising the ADR results and technology to help restructure and modernise its target definition program. General maintenance of all geophysical equipment is ongoing. Citigold is maintaining its reporting requirements and streamlining its tenement management program. No new exploration drilling was undertaken during the Quarter. Citigold is continuing to consolidate its drill hole database and fine-tune its planned drill holes for the Central area in order to help define gold lodes close to the planned decline. This information will in turn guarantee gold extraction in the shortest possible time. HEALTH, SAFETY AND ENVIRONMENT There were no Lost Time Injuries, significant environmental, health or safety issues during the Quarter. Citigold is very environmentally aware. Its site has not caused environmental harm and has been uniquely integrated in harmony with the local Charters Towers community. The Company plans to build upon these successes to date and to work towards solar power as the primary energy source. Modern solar and energy storage systems provide benefits not available a decade ago. This initiative will increasingly complement the move to take electric power underground for all of the mobile equipment thereby aiming to eliminate diesel engines from the underground environment. This will make for a safer and cleaner air working environment. Furthermore this then requires reduced energy use for ventilation fans because essentially most of the ventilation capacity is used to counter the extensive use of diesel engines underground that pollute the air, use up the oxygen and generate substantial heat. This increased monitoring included the drilling of ten new groundwater monitoring bores, five of these are around the Black Jack area stockpiles and five around the Imperial overburden rock stockpiles. All groundwater samples for the ten holes returned favourable results in compliance with the Company's Environmental Authority and the groundwater meets stock water drinking quality standards. No evidence of any contamination of the groundwater by the stockpiles or mining operations adjacent to the stockpiles was detected in the new or existing monitoring bores. This is in keeping with previous results and expectations. Geological assessment of the rock stockpiles confirms that they comprise background granite/granodiorite identical to the natural surrounding background rock, and are therefore incapable of adding any new contaminants above natural background levels. Preliminary three-dimensional (3D) modelling of the geochemistry of the Tailings Storage Facility ('TSF') has commenced by the drilling of eight initial boreholes from surface to the base of the TSF, sampling each hole at one-metre intervals in the deepest section of the TSF at the southern end. Assay results were not yet available at the end of the Quarter. Further drilling may be undertaken depending on the results obtained from this preliminary round of sampling. The intent of the sampling is to assess the level of any potential contaminants and the overall tailings chemistry to verify that the tailings are stable and non-polluting, both now and into the future. Previous sampling indicated that the tailings are relatively benign, and the pH was alkaline. This prevents the mobilisation of metals. The salt levels were low and the total sulphur levels were less than 0.2%, effectively eliminating the possibility of acid rock drainage. Modelling and generation of a 3D surface depicting the base of complete oxidation and the water table from borehole logs were completed for the Stockholm to Black Jack area, including the TSF. A separate surface was generated for the Imperial Mine area to better understand groundwater movement in these areas. Two consulting groups have been engaged to provide guidance on groundwater matters and on the geochemistry and reactivity of the rock stockpiles and TSF. The project was planned to be and remains in harmony with the natural and community environment. CORPORATE Major development funding Activities during the Quarter were directed towards securing a strategic partner to assist in developing and advancing the Group's Charters Towers Gold Project. Based on current discussions Citigold aims to finalise a transaction in the current Quarter. The Business Plan review was able to draw on over five years of analysis of how to automate an underground gold reef mine. Citigold is now in the unique position of having a clear view of how this will be implemented in parallel with the re-commencement of mining and development of an ultra-low cost producer of gold. Kolar Goldfield Post Quarter end the Company on 7 th April 2016 in Bangalore, India, signed a Memorandum of Understanding ("MOU") to partner with a consortium to potentially acquire the assets of Bharat Gold Mines Limited ("BGML"). The assets principally comprise mining leases, land and plant in the heart of the Kolar Goldfield, India. Citigold has been conducting field visits and investigations on the project since 2006. The Kolar Gold mining project is in the Kolar Gold Fields area 80 km east of Bangalore in Karnataka State (formerly Mysore) in southern India. The Kolar Gold Field is about 60 km 2 , although the enclosing schist belt is some 80km

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